Internet Sales Tax Would Be Crushing to Budding Businesses

May 6 may be a somber day for budding businesses and for some of the fastest growing industries in the country.

That is the day the Senate is expected to vote the so-called Marketplace Fairness Act, which would require a myriad of online businesses to collect and remit the applicable sales tax for their customer’s home state.

This new internet tax cartel would be a massive burden to these businesses both because they would take a financial hit (which would be passed onto consumers as well) and because they would have to take numerous cumbersome steps to comply with the law.

Pro-tax advocates of the bill brush these concerns aside asserting that free computer software will be provided to online businesses to help them calculate taxes due and create a single entity to collect taxes for all jurisdictions in their state.

But once that number is obtained, does the tax owed just magically appear at the proverbial doorstep of 45 different states and the District of Columbia?  Not at all.  In fact, we’ve pointed out how hellish this tedious process would be for business owners

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Morning Action: With Obama, Things Have Gone from Bad to Worse

SEQUESTER.  In the name of doing things “the fair way,” the White House is still demanding revenue to replace the sequester (sub. req’d):

The White House is clinging to its faltering sequester strategy even after announcing last week that President Barack Obama will sign a revenue-free fix to stop furloughs at the Federal Aviation Administration.

Press Secretary Jay Carney reiterated Monday that the White House is still demanding revenue as part of a broader sequester deal.

“It is the wrong way to reduce our deficit or eliminate the sequester by simply saying, ‘You know what, we’ll just ask seniors to deal with it. We’ll hold harmless millionaires and billionaires.’ … That’s not the way this can happen,” he said. “It’s not the fair and right way, and it’s not good policy, and that’s why the president insists that we need to do this in a balanced way.”

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Delaware’s Chris Coons Doesn’t Want You to Pay Taxes…Sometimes

Last night, the Senate moved to end debate on so-called Marketplace Fairness Act, more commonly known as the Internet Sales Tax.  The bill would turn small, online businesses into tax collectors for states in which they have no real connection.  Despite representing a state without a sales tax, Delaware Senator Chris Coons favors the legislation.

According to the Associated Press, Coons “supports the bill in part because tax-free Internet sales are eating into sales by Delaware retailers.”  The article continues:

“In our region, we’ve long benefited from significant commercial sales from residents of Maryland, of New Jersey, Pennsylvania and elsewhere, who come to Delaware to shop because we’re a tax-free state,” Coons said. “Over time, the benefit of that has eroded as folks discovered that they could buy the same things online without paying sales tax from home.”

This is earmark-style parochialism at its worst.  Coons wants to end tax-free shopping online so people will bring their tax-free shopping habits back to his home state.

So insular is Coons’ focus, he is urging “residents of Maryland, of New Jersey, Pennsylvania and elsewhere” to break their respective states’ tax laws.  As the same AP article explains, “In many states, shoppers are required to pay unpaid sales taxes when they file state tax returns.”

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10 Awful Things About the Internet Sales Tax

1. Shop China.  According to Sen. Ron Wyden (D-OR), “the way this bill is going to work, people are going to end up calling it the shop Canada bill or maybe the shop Mexico bill or, what is even more ominous, the shop China bill.”

2. Taxation without Representation.  As Heritage President Jim DeMint explains, the internet sales tax “violates the classic American principle of ‘no taxation without representation.’  Retailers would be forced to act as tax collectors for states in which they have no voice.” 

InternetSalesTax_v2

 

3. Playing favorites.  The left disingenuously claims this bill is about leveling the playing field.  The exact opposite is true.  This bill was a direct result of lobbying by large corporations.  This bill is crafted to advance the interests of big government and big businesses

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46 Tax Audits from Hell

Nothing strikes more fear in heart of employers and employees alike than the dreaded audit.  Under a bill working its way through the Senate, audits could become commonplace for many small, online businesses.  With the way the bill is going to work, people are going to end up calling it the Tax Audits from Hell Act of 2013.

Under the so-called Marketplace Fairness Act, online retailers would become tax collectors for faraway governments thirsty for more revenue.  But because complying with America’s 9,646 different taxing jurisdictions is no easy task, the threat of audits would become a stark reality.  In an attempt to streamline the inevitable avalanche of audits, the bill  sets up:

a single audit of a remote seller for all State and local taxing jurisdictions within that State; 

In practical terms, that means online businesses will face the threat of 46* out-of-state audits.  And while the bill attempts to limit the liability of inevitable software errors, the risk of a multiple audits cannot be ignored.  Even the New York Times’ Andrew Ross Sorkin who favors the bill shudders “about the prospect of an out-of-state tax audit.”

A few examples.

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